Leverage was recently briefed on a matter where a mortgagee was not registered on title. The property was  almost sold from under the mortgagee.

The facts of the case are as follows:

  • The agent was requested by the registered proprietor to sell the property. The agent undertook an inspection and provided an estimated selling price.
  • The property was unable to sell at that price and was reduced. This was approved by the Vendor by text. A Purchaser was obtained for the property and the contracts were exchanged through solicitors.
  • A person emerged who indicated that they’d loaned all of the money to the registered proprietor. The mortgage documents were produced, but no mortgagee had been registered on title.
  • The person who had loaned the money, had decided not to register the mortgage because they were friendly with the owner. Obviously, finding that the mortgage wasn’t registered, the owner attempted to sell the property without telling the mortgagee. It was only by chance that the mortgagee ascertained that the property was on the market and contacted the agent. The mortgage was then registered.
  • The mortgagee was able to have the contracts rescinded under the relevant jurisdictional legislation because the purchase price would not even repay the mortgage.

The owner of the property is now blaming the agent for putting pressure on her to sell the property. Thank goodness, the agent has been diligent in obtaining everything in writing. Moreover, the contracts were executed between solicitors without the agent been involved with the exchange. One wonders what the ramifications would have been if the agent had exchanged contracts.

This is a frightening set of facts. There is no way an agent or a solicitor would even know about the property having a silent mortgagee on it. The property searches showed that the vendor had an unencumbered property. What is even more concerning, is that the vendor turned up with the certificate of title and tried to get a new one issued from the Land Titles Office. There is nothing the agent or the solicitor could do to prevent this from occurring.

Those people wanting to list their houses “off market” where no one is aware that the property is for sale, are getting away with it in circumstances where there is an unregistered mortgage over the property. It was the public advertising of this property, which drew the attention of the mortgagee to the property.

I wish I could provide you with some advice for how to protect yourself in these circumstances. If the sale had been settled and the mortgagee disentitled to their money, I wonder if the agent’s professional indemnity insurance would have been used as a means of compensation.

The agent is lucky in these circumstances and maybe he should just go out and buy a lottery ticket.

This article was written by Bailey Compton, Principal Solicitor & Director at Leverage Group.

To get in touch with Bailey, please email info@leveragegroup.com.au or call 1300 438 538